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Shareholders liable for tax debts of companies on winding up

Tuesday, 11 June 2013   (0 Comments)
Posted by: Author: Ben Strauss
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Author: Ben Strauss (Director, Tax, Cliffe Dekker Hofmeyr)

Be aware of potential liabilities.

The Tax Administration Act, No 28 of 2011 (TAA) took effect on 1 October 2012.

Among other things, the TAA makes third parties liable for the tax debts of taxpayers, under certain circumstances. In terms of s181 of the TAA, shareholders of a company can be liable for the tax debts of a company on winding up.

In terms of s181(1) of the TAA the provision applies "where a company is wound up other than by means of an involuntary liquidation without having satisfied its tax debt...." Put simply, a tax debt is an amount of tax due in terms of any law administered by the South African Revenue Service (Sars).

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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